United Snack Company sells 40-pound bags of peanuts to
university dormitories for $54 a bag. The fixed costs of this
operation are $589,160, while the variable costs of peanuts are
$0.32 per pound.
a. What is the break-even point in bags?
b. Calculate the profit or loss (EBIT) on 6,000
bags and on 19,000 bags.
|
|
Bags |
Profit/Loss |
Amount |
6,000 |
|
|
19,000 |
|
c. What is the degree of operating leverage at
18,000 bags and at 23,000 bags? (Round your answers to 2
decimal places.)
|
|
Bags |
Degree of Operating Leverage |
18,000 |
|
23,000 |
|
d. If United Snack Company has an annual interest
expense of $32,000, calculate the degree of financial leverage at
both 18,000 and 23,000 bags. (Round your answers to 2
decimal places.)
|
|
Bags |
Degree of Financial Leverage |
18,000 |
|
23,000 |
|
e. What is the degree of combined leverage at
both a sales level of 18,000 bags and 23,000 bags? (Round
your answers to 2 decimal places.)
|
|
Bags |
Degree of Combined Leverage |
18,000 |
|
23,000 |
|